The sky’s not the limit

THE European trade commissioner, Karel De Gucht, has long been determined to take China to task for unfair trade practices. As a result, it has looked as though a trade war might break out between China and the EU.
Two months ago, as part of an anti-dumping case against China, the EU imposed punitive tariffs on solar panels and related components, solar wafers and cells. The initial penalty was set at roughly 12%, but was to rocket to an average of nearly 50% on August 6th. China had threatened to punish European exports of wine and polysilicon.
Things looked bleak until suddenly, on July 27th, a truce was announced. The EU will set a minimum sales price, though far below the level expected. It will also set a (generous) quota beyond which heavy duties would apply. A deadline of August 8th looms on a related dispute, but Jacquelyn MacLennan of White & Case, a law firm, thinks further action on solar panels is unlikely.
Chinese officials are pleased. The ministry of commerce gushed that the deal displayed wisdom as well as “pragmatic and flexible attitudes”. China is also reconsidering its earlier threats to curb EU exports.
Even so, it may be premature to celebrate. EU ProSun, an industry lobby, is planning to appeal against the decision. “This agreement is not a solution but a capitulation,” it thundered. And indeed it is, in a way. China forced Mr De Gucht to cave in by pressing several European countries, notably Germany, into speaking out against his investigations.

Telecoms is the other worry. Mr De Gucht has been rattling his sabre about a possible investigation into subsidies granted to Huawei and ZTE, two Chinese telecoms giants. He went out of his way to say that “mobile networks were not even mentioned” in the recent solar talks.
Will he dare proceed, given the recent climbdown? Expert opinion is divided, but one European finance minister, who describes Mr De Gucht as “an extremely stubborn man with nothing to lose”, thinks he might. If he does, expect a battle royal.